eTrade 2010 Annual Report Download - page 148

All of the Company’s notes are unsecured and will rank equal in right of payment with all of the Company’s
existing and future unsubordinated indebtedness and will rank senior in right of payment to all its existing and
future subordinated indebtedness.
Debt Exchange
In 2009, the Company exchanged $1.7 billion aggregate principal amount of its corporate debt, including
$1.3 billion principal amount of the 12
1
⁄ 2 % Notes and $0.4 billion principal amounts of the 8% Notes for an
equal principal amount of newly-issued non-interest-bearing convertible debentures. The Company recorded a
pre-tax non-cash charge of $968.3 million on the early extinguishment of debt related to the Debt Exchange for
the year ended December 31, 2009.
8% Senior Notes due June 2011
In 2005 and 2004, the Company issued an aggregate principal amount of $100 million and $400 million in
senior notes due June 2011, respectively. Interest is payable semi-annually and notes are non-callable for four
years and may then be called by the Company at a premium, which declines over time.
In 2009, $0.4 billion of the 8% Notes were exchanged for an equal principal amount of the newly-issued
non-interest-bearing convertible debentures. Refer to the Debt Exchange section above for more details.
7
3
⁄ 8 % Senior Notes due September 2013
In 2005, the Company issued an aggregate principal amount of $600 million in senior notes due
September 2013 (“7
3
⁄ 8 % Notes”). Interest is payable semi-annually and the notes are non-callable for four years
and may then be called by the Company at a premium, which declines over time.
7
7
⁄ 8 % Senior Notes due December 2015
In 2005, the Company issued an aggregate principal amount of $300 million in senior notes due
December 2015 (“7
7
⁄ 8 % Notes”). Interest is payable semi-annually and the notes are non-callable for four years
and may then be called by the Company at a premium, which declines over time.
12
1
⁄ 2 % Springing Lien Notes due November 2017
In 2007 and 2008, the Company issued an aggregate principal amount of $1.8 billion and $150 million of
12
1
⁄ 2 % Notes, respectively. Interest is payable semi-annually and the notes are non-callable for five years and
may then be called by the Company at a premium, which declines over time. The Company had the option to
make interest payments on its 12
1
⁄ 2 % Notes in the form of either cash or additional 12
1
⁄ 2 % Notes through May
2010. In 2008, the Company elected to make its May interest payment of $121 million in cash and its November
interest payment of $121 million in the form of additional 12
1
⁄ 2 % Notes. In 2009, the Company elected to make
both the May and November interest payments of $128.5 million and $54.7 million, respectively, in the form of
additional 12
1
⁄ 2 % Notes. In 2010, the Company made both the May and November interest payments in cash.
The indenture for the Company’s 12
1
⁄ 2 % Notes requires the Company to secure the 12
1
⁄ 2 % Notes with the
property and assets of the Company and any future subsidiary guarantors (subject to certain exceptions). The
requirement to secure the 12
1
⁄ 2 % Notes will occur on the earlier of: 1) the date on which the 8% Notes are
redeemed; or 2) the first date on which the Company is allowed to grant liens in excess of $300 million under the
8% Notes. The requirement to secure the 12
1
⁄ 2 % Notes is limited to the amount of debt under the 12
1
⁄ 2 % Notes
that would trigger a requirement for the Company to equally and ratably secure the existing 8% Notes, 7
3
⁄ 8 %
Notes and the 7
7
⁄ 8 % Notes.
In 2009, $1.3 billion of the 12
1
⁄ 2 % Notes were exchanged for an equal principal amount of the newly-issued
non-interest-bearing convertible debentures. Refer to the Debt Exchange section above for more details.
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